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IMF Warns Severe Trouble Ahead

For weeks, rumors have been swirling about potential global economic unrest on the near horizon, yet the warnings are systematically explained away.

At the G7 Summit on Thursday, Japanese Prime Minister Shinzo presented declining commodities data as “warning of the re-emergence of a Lehman-scale crisis,” according to CNBC.  At the same time, CNBC dismissed it as political posturing as a means of delaying tax increases.

In April, the IMF released it’s Global Financial Stability Report, stating:

“The current report finds that global financial stability risks have risen since October 2015. The report finds that the outlook has deteriorated in advanced economies because of heightened uncertainty and setbacks to growth and confidence… These developments have tightened financial conditions, reduced risk appetite, raised credit risks, and stymied balance sheet repair. A broad-based policy response is needed to secure financial stability. Advanced economies must deal with crisis legacy issues…and the resilience of market liquidity should be enhanced. Finally, the report assesses changes in the systemic importance of insurers, finding that across advanced economies the contribution of life insurers to systemic risk has increased in recent years. The results suggest that supervisors and regulators should take a more macroprudential approach to the sector” (IMF.org).

In short, the report warns that the global economy is on the precipice of a looming disaster unless steps are taken to intervene, even in the usually stable insurance industry.

Too many warnings have been sounded to document here, but they have all been ignored by the market.

As a small example of how global markets disregard the facts, Venezuela is in serious trouble.  The country is in such bad shape they don’t even have enough money to have their money printed, according to Bloomberg.

Although we have witnessed mild market turbulence in the U.S., the markets have mostly yawned…before retracing their upward climb.

China has been hit pretty hard in the past year, but the rest of the world – although mildly concerned about the potential fallout – seems to move along as if our economies are not all interconnected.

Trouble is brewing!

Venezuela is a foreshadowing of what could happen to major world economies as debt becomes unsustainable, yet instead of finding solutions, they blame their situation on the United States.

China is in trouble, yet they deny it and paper over it with government intervention.

Almost every developed nation is in trouble, yet central banks are helping paper over the entire looming disaster by printing more and more money to buy more and more debt.

Eventually, the collapse will happen. I hope we are all sufficiently prepared.

 

 

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  1. To that last sentence, I do, too. Some of these reports appear to be timed for upcoming changes in political leadership, and the IMF is no stranger in doing that. The leadership of the IMF seems to be run by some suspiciously socialistic people, at times, and a Republican gets worse news than many Democrat leaders, usually. Not to put all of the blame on politics, but it has it’s share of blame, doesn’t it? When Obama became president, that was one of the few times a Democrat had the bad news, but the Republicans gave him the fix, and he used Keynesian economics to further “Fix” it, which turned out to be another boondoggle to pay off his supporters(Solyndra comes to mind). I’m guessing that all the money used in Obama’s recovery was used in a way that caused the so-called recovery to last the entire eight years, and not be much of recovery. A lot of people got left behind in the process, and may never be able to catch up.
    I sure hope we don’t turn out like Venezuela. At least our economy has more than one place to expand. Venezuela is unique in that they allowed a tin pot dictator to come into power, and take over everything, while promising the moon, and his follow on leader continued the trend. I wonder how much money, in US dollars Maduro has in his vault, while the people of Venezuela end up in revolt?

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